But are you really ready?
Are you sure?
Buying a home isn't something you've probably done often, if ever, in your lifetime, so don't worry about what you don't know. However, with that being said, if you want to make sure you get the best possible home at the best possible price, then you should take some time to research the do's and don'ts when it comes to buying a home. This is the only way you will be able to make an educated decision about how to proceed while avoiding the mistakes other home buyers have made...right?
So let's get started...
Well, the big deal is that, for most people, buying a home is one of the biggest purchases, if not the biggest, they will make in their lifetime—and that makes it a big deal. In fact, if you get it wrong, you could end up paying for one or more of your home buying mistakes for up to 30 years!
We said 30 years—as in a 30-year mortgage. And that's a long time to pay for a few simple mistakes. Things that could have easily been avoided had you only spent a few hours learning about how to buy a home while avoiding the most common mistakes homebuyers make.
Now that we have that out of the way...let's move on.
Hello Millennials, it's your time to invest in the American Dream of homeownership and you can do that without a hitch if you know exactly what to do and what not to do.
Here are 11 tips to help you buy your first home or next home without falling prey to the most common home buying mistakes.
Buying a house isn't something you can just wake up one day and decide to do with little to no thought. Buying a home requires forethought and planning. So the first thing you need to do is develop a timeline which should begin with saving for your down payment.
Quite often people think that saving a down payment for their home is hard and will take a long time. However, if you stop and assess the money you spend each day, we'd bet you can probably find some things you could easily cut out of your spending that would make a big impact on what you can quickly save.
For example, make your coffee at home versus buying a coffee every day from a retailer. How many times a week do you eat out? Why not cut that in half or eliminate it altogether, at least until you have enough money for your down payment. Could you buy generic items rather than buying name brand goods at the grocery store? These are just a few of the ways you could quickly and easily come up with a down payment for your new home.
Pull all three of your credit bureau reports and check them for accuracy. Make any corrections that are necessary, so they pull up clean and current. Your credit score is a major determining factor with lenders and will ultimately decide the type of loan you can get, as well as the interest rates you could expect to receive. You can check your credit report for free at annualcreditreport.com, which is the only free credit report source authorized by Federal law.
What we mean by this is you need to develop a new budget that you will follow after you've purchased your new home. This will tell you how much home you can afford to buy. For example, you can afford to pay X dollars a month for a mortgage payment (don't forget to include PMI, homeowners insurance and property taxes); therefore, you can afford a home that costs X amount. You can use a mortgage calculator to help with your calculations.
If you are buying a home, you will need to find a buyer's agent. This is a real estate agent dedicated to helping buyers find a home and maneuver through the home buying process. A dedicated buyer's agent will protect you from any conflicts of interest because once you enlist the help of a buyer's agent, they are obligated to work in your best interest.
Before you start looking for a house, you should go ahead and talk with a lender. Your lender will go over all the costs involved in buying a home so you know exactly what to expect. The lender will then start the process of getting you pre-approved for a mortgage loan.
There are several benefits to getting pre-approved before looking for a home. For example, you will know exactly how much you have to spend on a home, and, sellers are more likely to accept a contract that has a preapproval letter attached to it over ones that don't. Just make sure you review lenders and compare interest rates first so you know you are getting the best of both.
Of course, you've driven around the neighborhood to scope things out...right? If not, you should go ahead and do that so you don't buy a house that's around the block from a dilapidated area that you will have to drive through every day or night while going wherever it is you have to go.
But that's not all you need to do.
You should also vet the area for what you don't know. For example, check the crime stats on SpotCrime.com. This will give you any crimes that have occurred within a five-mile radius. You should also check plotscan.com this will tell you about any environmental hazards and/or threats that have occurred or are present in that area. Then you should check the FEMA Flood Zone Map, this will tell you if that home is in a flood zone. If it is, you will be required to buy and maintain flood insurance until your mortgage is paid off. It would also be wise to check with the city planning department to find out if there are any plans to build around your home. If there are, this could, in some cases, negatively affect your property value (think big box store being built behind your house, etc.).
When determining the space you will need, it's best to think about the future (at least the next five years) before making any decisions. Think about how long you plan on living in that home, if you plan on having kids and if so how many, do you need space for a home office, game room, man cave, etc. All these things will determine how much space you need, so be sure to think about now and the future before you decide. You don't want to outgrow your house and have to move sooner than expected.
Before you buy a home, make sure you have an emergency maintenance fund to cover any unexpected repairs and/or major replacements. If you don't, you could lose your home.
In addition, please be aware that your property taxes could potentially go up each year. If the property values go up in your area, so will your annual property taxes. And, if you buy a new construction home, in most cases, property values typically go up significantly within the first five years or so. What this means is that you will need to be prepared to pay a higher mortgage payment each year your property value goes up, if you have a mortgage that rolls your annual property taxes into it. So make sure you anticipate and include that in your budget; otherwise, if you can't pay the higher mortgage payment or an annual lump sum property tax payment, you could ultimately lose your home.
It's not uncommon for a homebuyer to find a house they absolutely love and absolutely have to have—except—it's out of their price range. Don't fall into the trap of extending your original budget or reworking your loan so you can get that house. It's not worth it because it could get you into trouble later. In addition, when looking for a home, don't use your pre-approved loan amount as your guideline for what you can afford. Always try to find a house that is below your preapproved amount because you never know what expenses (job loss, medical, home, kids, etc.) are going to come up. Doing this is just another step in making sure you don't lose your house because you can't make the payments.
Once you've found a home you want to buy, it's time to have it inspected, even if you plan on renovating it once it's yours. The home inspection will uncover any potential issues with that home big or small, seen and unseen. And, unfortunately, if there are too many issues or ones that are too great to overcome, you are going to have to walk away from the deal. Don't worry though, if this does happen, there will always be another house—guaranteed. So don't get discouraged, the next house you find could be even better!
Here are some of the most common home buying mistakes you should avoid.
Most people find buying a home one of the most exciting things they will ever do regardless of how stressful it can be. However, you are doing the right thing by educating yourself about the home buying process and this is what will help you sail through it as smoothly as possible.
Are you ready?
Let's Do This!
Check out other helpful resources for millennial home buyers
Buying a home as a millennial - here's what you need to know: In this article, the Shelhamer Group takes a look at millennial homebuyers, what they experience in today's real estate market and advice for what to expect.
In this article from CinciNKYRealEstate, Paul Sian provides excellent information on saving up for a down payment.
Bill Gassett over at maxrealestateexposure tackles the ultimate question millennial home buyers facing - Should I Rent or Buy?
Eileen Anderson provides insights on what is important to millennial home buyers and how should home sellers prepare their home to sell to this upcoming group of home buyers!
You have to live somewhere so while you are paying a mortgage payment you are actually living in your asset is just one reason Kevin Vitali writes in his article - The True Value Of Owning A Home For Millennials